Sembcorp Industries (SGX: U96) shares are down 5% today. U96 shares have fallen on no specific piece of news. There seems to be a combination of two things going on here. One is simply that Sembcorp shares have done well over the past few days - again for no grand nor very apparent reasons. OK, there was the agreement to power up the ST Telemedia data centres but that’s not a hugely material matter for something Sembcorp’s size. We can easily imagine people getting a little excited by that and then that effect fades.
On the other hand most of the Singapore market is down today. And that’s where the macroeconomic factors come in. Don’t forget what the business is: “Sembcorp Industries Ltd, an investment holding company, engages in the renewables, integrated urban solutions, conventional energy, and other businesses in Singapore, the United Kingdom, China, India, rest of Asia, the Middle East, and internationally.” If we think, in general, that economic prospects aren’t as good as we thought they were yesterday - and thus the falling market in general - then energy companies are going to be geared to that. Simply because energy demand is geared to general macroeconomic conditions.
Sembcorp Industries share price from Google Finance
As we’ve noted before there is a certain volatility to Sembcorp: “Sembcorp Industries back up 4.5% after yesterday’s price cap induced 12% fall” Now yes, that fall had a specific cause but the 4.5% - about the same size as today’s move - didn’t. Equally on U96: “Sembcorp Industries (SGX: U96) shares are down 3% in Singapore today.” There have been other issues, as when the newly demerged Seatrium had historic bribery problems. And of course profits announcements have driven near 10% changes in Sembcorp’s share price.
It’s just one of those things about energy suppliers. Given that gearing of energy demand - and thus prices - to general macroeconomic factors energy company share prices are likely to wilt more than the market when we all start worrying about that economic future. Just one of the things that goes with the terrain.